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Local investors remain cautious

Monday’s Dow Jones drop causes uneasiness

POSTED: August 9, 2011 11:30 p.m.

Following the Dow Jones Industrial's worst point drop since December 2008, local investors remained cautious, but for the most part continued to invest.

Monday's drop of more than 600 points and its first time dipping under 11,000 since November had many on Wall Street wiping sweat from their foreheads.

The drop was primarily a result of Standard & Poor's decision to downgrade the U.S. credit rating from AAA to AA+.

Beth Baldwin, financial adviser at the Green Street Edward Jones Financial location, said investors seemed nervous but not panicked following Monday's closing.

"They're cautious and they're scared and they're nervous. Probably they're more cautious than anything and a little apprehensive about what's happening," Baldwin said.

The market experienced a bit of a roller coaster ride Tuesday with the Dow hovering around 11,000 for most of the day until the Federal Reserve announced its decision to keep interest rates at an exceptionally low level until 2013. After the decision, the average dropped 100 points but rebounded to close nearly 430 points higher than Monday.

Baldwin said she is hopeful the market will continue to rise, but she is not entirely confident that it will.

"We would like for it to go back up, but our crystal ball is not much better than anybody else's at this point in time," she said. "I think there's been some overreaction and I think that's the cause of all the volatility."

Baldwin said she places some of the blame for Monday's 600 point drop on Standard & Poor's downgrade of the credit rating — a decision she believes was also an overreaction.

While the market was in a free-fall Monday, Baldwin said she received several calls from investors worried about their stocks, but she didn't that same reaction Tuesday.

"I think the reason for that is Edward Jones has a philosophy of buying good quality investments, holding them for the long-term with a diversified portfolio," she said. "We try to teach our clients to have patience in the market and to understand that there's going to be some adjustments along the way, keeping in mind our long-term investment philosophy."

With stock market prices low, Baldwin said many investors seized the opportunity to purchase while they are low.

She said "That's a real good sign."

 



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